Barter: Development of accounting practice and theory

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The Accounting Historians Journal Vol. 12, No. 2 Fall 1985
Williard E. Stone UNIVERSITY OF FLORIDA (EMERITUS)
BARTER: DEVELOPMENT OF ACCOUNTING PRACTICE AND THEORY
Abstract: John Mair, in 1752, stated, "Barter, or the exchange of goods for goods, is nothing else but buying and selling blended together." This statement, for all its seeming simplicity, is an excellent expression of the confusion which has accompanied the practice and theory of recording this most basic commercial transaction. Can one accounting transaction be both a sale and a purchase at one and the same time and for the same accounting entity?
The proper recording of the barter transaction has occupied the attention of accounting text book authors, beginning in 1494 with Pacioli, with various authors expounding different solutions for almost 500 years. It was not until 1971 that a sound theoretical solution was presented.
Barter, or the exchange of one good for another, was the oldest form of commercial transaction. Although this primitive transaction, without the complication of monetary or credit instruments, may seem a very simple one, in fact it presents unexpected difficulties for the accountant. The basic question that arose concerned the nature of a barter transaction. Is it a purchase, a sale, or possibly, as one author characterizes it, a simultaneous purchase and sale? The recommended recording methods varied considerably, and no logical theoretical basis existed for the accounting practices pre-sented.
In attempting to trace the development of accounting theory and practice with respect to the recording of barter transactions we must infer them from the writings of early authors by reference to the demonstrations given in their books. In addition, it may be un-justified to conclude that the methods demonstrated were common bookkeeping practices of the time. Within these limitations, an at-tempt will be made to deduce the early development of the practice and theory underlying the recording of barter transactions.
Pacioli To the 19th Century
Pacioli, in discussing the accounting treatment for barter, stated: "first enter it (the barter transaction) in the memorandum book,